JPMorgan highlights the liquidity advantage of BlackRock and Fidelity’s Bitcoin ETFs over Grayscale’s offering, suggesting a potential shift in investor preference unless Grayscale adjusts its fee structure. Despite a slowdown in outflows from Grayscale’s Bitcoin Trust (GBTC) following SEC approval, the fund faces ongoing competition from newer spot Bitcoin ETFs, particularly those offered by BlackRock and Fidelity.
The research report by JPMorgan indicates that Grayscale, known for charging higher fees than its competitors, may continue to see a decline in funds unless it significantly reduces its fees. Grayscale has already lowered its management fee from 2% to 1.5% in its transition to a spot Bitcoin ETF, yet remains more costly than its counterparts.
Analysts, led by Nikolaos Panigirtzoglou, pointed out that the BlackRock and Fidelity ETFs boast superior liquidity metrics over GBTC. Two key metrics underscore their advantage: the Hui-Heubel ratio, a proxy for market breadth, where GBTC’s value is roughly four times higher than that of its competitors, indicating lesser market breadth; and the average absolute deviation of ETF closing prices from the net asset value (NAV). In recent comparisons, the NAV deviations of BlackRock and Fidelity’s ETFs have aligned closer to those of the GLD Gold ETF, signifying enhanced liquidity, whereas GBTC’s deviations have remained elevated, suggesting lower liquidity.
Grayscale has contested these findings, with Louis Hsu, Vice President of ETFs at Grayscale, arguing that when considering dollar volume traded – a primary measure of ETF liquidity – GBTC has led the market since its inception as a spot Bitcoin ETF.
This analysis comes at a critical time for Bitcoin investment products as the market landscape evolves with the introduction of spot Bitcoin ETFs. The competition among ETF providers intensifies, emphasizing the importance of fee structures and liquidity in attracting and retaining investors.
